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6. DEBT.
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Dec. 31, 2011
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| Debt Disclosure [Text Block] |
Long-term
debt is summarized in the following table (in
thousands):
Kinergy
Line of Credit – Kinergy has a working capital
line of credit in an aggregate amount of up to $30,000,000,
with an optional accordion feature of an additional
$5,000,000. The credit facility is based on Kinergy’s
eligible accounts receivable and inventory levels, subject to
certain concentration reserves. The credit facility is
subject to certain other sublimits, including as to inventory
loan limits. Interest accrues under the line of credit at a
rate equal to (i) the three-month London Interbank
Offered Rate (“LIBOR”), plus (ii) a specified
applicable margin ranging between 3.50% and 4.50%. The
applicable margin was 3.50% at December 31, 2011. The credit
facility’s monthly unused line fee is 0.50% of the
amount by which the maximum credit under the facility exceeds
the average daily principal balance. Kinergy is also required
to pay customary fees and expenses associated with the credit
facility and issuances of letters of credit. In addition,
Kinergy is responsible for a $3,000 monthly servicing fee.
Payments that may be made by Kinergy to the Company as
reimbursement for management and other services provided by
the Company to Kinergy are limited to $800,000 per fiscal
quarter in 2012 and $850,000 per fiscal quarter in 2013.
Kinergy is required to meet specified EBITDA and fixed
coverage ratio financial covenants under the credit facility,
as amended, and is prohibited from incurring any additional
indebtedness (other than specific intercompany indebtedness)
or making any capital expenditures in excess of $100,000
absent the lender’s prior consent. The Company believes
it is in compliance with these covenants. Kinergy’s
obligations under the credit facility are secured by a
first-priority security interest in all of its assets in
favor of the lender. The line of credit matures on December
31, 2013. The Company has guaranteed all of Kinergy’s
obligations under the line of credit. As of December 31,
2011, Kinergy had an available borrowing base under the
credit facility of $26,564,000 and an outstanding balance of
$20,432,000.
Notes
Payable to Related Parties – On March 31, 2009,
the Company’s Chairman of the Board and its Chief
Executive Officer provided funds in an aggregate amount of
$2,000,000 for general working capital purposes, in exchange
for two unsecured promissory notes issued by the Company.
Interest on the unpaid principal amounts accrues at a rate of
8.00% per annum. All principal and accrued and unpaid
interest on the promissory notes was initially due and
payable in March 2010. On October 29, 2010, the Company paid
all accrued interest and $750,000 in principal under these
notes. On November 30, 2011, the Company paid $500,000 in
principal under these notes. The Company recorded interest
under these notes of approximately $97,000 and $149,000 for
the years ended December 31, 2011 and 2010, respectively. As
of December 31, 2011, the remaining amount of $750,000 was
due and payable on the extended maturity date of March 31,
2012. On March 7, 2012, the maturity date was further
extended to March 31, 2013.
New
PE Holdco Term Debt and Operating Line of Credit
– On the Effective Date, approximately $294,478,000
in prepetition and post petition secured indebtedness of the
Plant Owners was restructured under a Credit Agreement
entered into on June 25, 2010 among the Plant Owners, as
borrowers, and various lenders. Under the Plan, the Plant
Owners’ existing prepetition and post petition secured
indebtedness of approximately $294,478,000 was restructured
to consist of approximately $50,000,000, plus accrued
interest of $1,279,000, in three-year term loans and a new
three-year revolving credit facility of up to $35,000,000 to
fund working capital requirements of New PE Holdco. The term
loan and revolving credit facility require monthly interest
payments at a floating rate equal to the three-month LIBOR or
the Prime Rate of interest, as elected by the borrower, plus
10.0%. At December 31, 2011, the rate was approximately
13.25%. Repayments of principal are based on available free
cash flow of the borrower, until maturity, when all principal
amounts are due. The term loan and revolving credit facility
represent permanent financing and are collateralized by a
perfected, first-priority security interest in all of the
assets, including inventories and all rights, title and
interest in all tangible and intangible assets, of New PE
Holdco. The creditors of New PE Holdco do not have recourse
to the Company. As of December 31, 2011, New PE Holdco had an
outstanding letter of credit of approximately $844,000,
unused availability under the credit facility of $12,178,000
and an outstanding balance of $21,978,000.
Convertible
Notes – On October 6, 2010, the Company raised
$35,000,000 through the issuance and sale of $35,000,000 in
principal amount of secured convertible notes (“Initial
Notes”) and warrants (“Initial 2010
Warrants”) to purchase an aggregate of 2,941,178 shares
of the Company’s common stock. On January 7, 2011, the
Company issued $35,000,000 in principal amount of secured
convertible notes (“January Convertible Notes”)
in exchange for the Initial Notes and warrants (“2010
Warrants”) to purchase an aggregate of 2,941,178 shares
of the Company’s common stock in exchange for the
Initial 2010 Warrants. The transactions contemplated by the
exchange agreements were entered into to, among other things,
clarify previously ambiguous language in the Initial Notes
and Initial 2010 Warrants, provide the Company with
additional time to meet its registration obligations and to
add additional flexibility to the Company’s ability to
incur indebtedness subordinated to the January Convertible
Notes. As discussed below, the January Convertible Notes were
valued at fair value, and as such, these modifications were
reflected in the fair value adjustments for the
period.
On
June 30, 2011, the Company issued $23,750,000 in principal
amount of secured convertible notes, reflecting the amount
then outstanding under the January Convertible Notes
(“June Convertible Notes”) in exchange for the
January Convertible Notes. The transactions contemplated by
the exchange agreements were entered into to, among other
things, defer an upcoming installment payment, add one
additional month to the maturity date and add a new
additional conversion price option as described further
below. As discussed further below, the June Convertible Notes
are valued at fair value, and as such, these modifications
are reflected in the fair value adjustments for the year
ended December 31, 2011.
On
August 3, 2011, under the terms of exchange agreements with
the holders of the June Convertible Notes, the Company issued
approximately $17,170,000 in principal amount, reflecting the
amount then outstanding under the June Convertible Notes, of
secured convertible notes (“Convertible Notes”)
in exchange for the June Convertible Notes. The transactions
contemplated by the exchange agreements were entered into to,
among other things, add three additional months to the
maturity date, add a new additional conversion price option
as described further below and reduce the price failure
threshold from $1.40 to $0.60. As discussed below, the
Convertible Notes are valued at fair value, and as such,
these modifications are reflected in the fair value
adjustments for the year ended December 31, 2011.
The Company was obligated to make amortization payments with respect to the principal amount of each of the convertible notes, beginning on March 7, 2011 and then on the first trading day of each calendar month thereafter, except for the month of August, through the extended maturity date of May 2012 (collectively, the “Installment Dates”).
On
each Installment Date, the Company was to pay an amount of
principal, as then determined under the convertible notes and
any accrued and unpaid interest (the “Installment
Amount”). The Company could elect to pay the
Installment Amount in cash or shares of its common stock,
subject to the satisfaction of certain conditions.
If
the Company elected to make all or part of an amortization
payment in shares of its common stock, it was required to
deliver to the holders of the convertible notes the amount of
shares of the Company’s common stock equal to the
portion of the amount being paid in shares of the
Company’s common stock divided by the lesser of the
then existing conversion price and 85% of the average of the
volume weighted average prices of the 5 lowest trading days
during the 20 consecutive trading day period ending on the
trading day immediately prior to the applicable Installment
Date.
All
amounts due under the convertible notes were also convertible
at any time, in whole or in part, at the option of the
holders into shares of the Company’s common stock at a
specified conversion price.
The
Company elected to account for the convertible notes using
the fair value alternative in order to simplify its
accounting and reporting of the convertible notes.
Accordingly, the Company adjusted as of each quarter the
carrying value of the convertible notes to their fair value
since their initial issuance in October 2010, with such
adjustments reflected in fair value adjustments on
convertible debt and warrants in the statements of
operations.
The
Company recorded income of $7,559,000 and expense of
$11,736,000 for fair value adjustments for the years ended
December 31, 2011 and 2010, respectively, for changes in fair
value, which adjustments are attributed to a reduction in the
principal balances and fluctuations in the market value of
the Company’s common stock during each quarterly
period. There were no changes in fair value of the
convertible notes due to a change in the estimated credit
risk of the instruments. See Note 13 for the Company’s
fair value assumptions.
The
following table summarizes the Installment Amounts and
additional conversions by the note holders through their
retirement on November 14, 2011 (in thousands):
*
Cash payments
Registration
Rights Agreement –
In connection with the sale of the Initial Notes (and
Convertible Notes) and the Initial 2010 Warrants, the Company
entered into a registration rights agreement with all of the
investors to file a registration statement on Form S-1 with
the Securities and Exchange Commission. In compliance with
the Company's obligations under the registration rights
agreement, as amended by the aforementioned exchange
agreements, the Company filed a registration statement on
Form S-1 to register for resale by the investors 3,968,423
shares of common stock underlying the Convertible
Notes.
Interest
Expense on Borrowings – Interest expense on all
borrowings discussed above was $14,813,000 and $6,261,000 for
the years ended December 31, 2011 and 2010,
respectively.
Long-term
debt due in each of the next two years is as follows (in
thousands):
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